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    Jawaban Soal No.1

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    Enci Unsriyani
    Greenlaw Inc. must make several accounting entries at year-end related to magazine subscriptions, self-insurance, and legal claims. For magazine subscriptions, they will recognize $600,000 of revenue from subscriptions expired in 2017. For self-insurance, they will set up a $55,000 reserve for expected losses. For the author's breach of contract claim, they will record a $100,000 contingent liability. For an industrial espionage lawsuit, they will record a $1,500,000 contingent liability.

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    Jawaban Soal No.1

    Uploaded by

    Enci Unsriyani
    136 views2 pages
    Greenlaw Inc. must make several accounting entries at year-end related to magazine subscriptions, self-insurance, and legal claims. For magazine subscriptions, they will recognize $600,000 of revenue from subscriptions expired in 2017. For self-insurance, they will set up a $55,000 reserve for expected losses. For the author's breach of contract claim, they will record a $100,000 contingent liability. For an industrial espionage lawsuit, they will record a $1,500,000 contingent liability.

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    Greenlaw Inc. must make several accounting entries at year-end related to magazine subscriptions, self-insurance, and legal claims. For magazine subscriptions, they will recognize $600,000 of revenue from subscriptions expired in 2017. For self-insurance, they will set up a $55,000 reserve for expected losses. For the author's breach of contract claim, they will record a $100,000 contingent liability. For an industrial espionage lawsuit, they will record a $1,500,000 contingent liability.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    136 views2 pages

    Jawaban Soal No.1

    Uploaded by

    Enci Unsriyani
    Greenlaw Inc. must make several accounting entries at year-end related to magazine subscriptions, self-insurance, and legal claims. For magazine subscriptions, they will recognize $600,000 of revenue from subscriptions expired in 2017. For self-insurance, they will set up a $55,000 reserve for expected losses. For the author's breach of contract claim, they will record a $100,000 contingent liability. For an industrial espionage lawsuit, they will record a $1,500,000 contingent liability.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Greenlaw Inc.

    , a publishing company, is preparing its December 31,2016,


    financial statements and must determine the proper accounting treatments for
    each of the following situations:

    1. Greenlaw sells subscriptions to several magazines for a 1,2, or 3-year


    period. Cash reciepts from subscribers are credited to Unearned
    Revenue: Magazine Subscriptions, and this account had a balance of
    $2,500,000 at December 31,2016, expire as follows:

    During 2017-$600,000
    During 2018-$900,000
    During 2019-$400,000

    2. On January 4,2016, Greenlaw discounted collision, fire, and theft


    coverage on its delivery vehicles and became self-insured for these
    risks. Actual losses of $45,000 during 2016 were charged to delivery
    expense. The 2015 premium for the discontinued coverage amounted to
    $100,000, and the controller wants to set up a reserve for self-
    insurance by a debit to Delivery Expense of $55,000 and a credit to
    Reserve for Self-Insurance of $55,000.

    3. A suit for breach of contract seeking damages of $1,000,000 was filed


    by an author against Greenlaw on July 3, 2016. The company\'s legal
    counsel believes that an unfavorable outcome is probable. A reasonable
    estimate of the court\'s award to the plaintiff is in the range between
    $100,000 and $500,000. No amount within this range is a better
    estimate of potential damages than any other amount.

    4. During December 2016 a competitor company filed suit against


    Greenlaw for industrial espionage claiming $2,000,000 in damages. In
    the opinion of management and company counsel, it is reasonably
    possible that damages will be awarded to the plaintiff, and the amount
    of potential damages awarded to the plaintiff is estimated to be
    $1,500,000.

    Required:
    1. For each of the preceding situations, prepare the journal entry that
    should be recorded as of December 31, 2016, or explain why an entry
    should not be recorded.

    Solutions

    1. Unearned Revenue: Magazine Subscriptions 600.000

    Magazine subscriptions 600.000

    (Accounting for revenue expired during 2016 (2500000-(600000 +

    900000 + 400000))

    2. Delivery Expense 55.000

    Reserve for self-insurance 55.000

    (Amount determinable as provided to Insurance company in 2015

    (100.000-Actual loss already charged to delivery expense 45.000 )

    3. Damage claim for breach of contract 100.000

    Contingent Liability for Damage Suit 100.000

    (Contingency created as per GAAP with the minimum of the estimate

    range)

    4. Damage Claim 1.500.000

    Contingent Liability for Indl. espionage suit 1.500.000

    (Contingent liabilty created for the reasonably possible estimate )

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